India's services sector recorded its strongest growth in six months in May 2026, reflecting resilient domestic demand despite a challenging global environment. The HSBC India Services Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 59.8 in May from 58.7 in April, remaining well above the 50-mark that separates expansion from contraction.

The improvement was primarily driven by a pickup in domestic demand, which boosted new business inflows and overall activity levels across the services industry. Survey participants reported stronger demand from local clients, helping offset softer international orders. While export business continued to grow, global demand remained below the average levels seen over the past year.

Despite the strong expansion in activity, employment growth remained relatively cautious. Service providers continued to add staff, but hiring did not accelerate significantly as companies remained mindful of economic uncertainties and future demand trends.

Business sentiment also softened further, with optimism declining for the second consecutive month. Companies cited concerns related to global economic conditions and demand sustainability, leading to a more cautious outlook despite current growth momentum.

The latest data reinforces the importance of the services sector as a key driver of India's economy. The sector accounts for a majority share of the country's economic output and has remained resilient even as global trade and geopolitical uncertainties continue to affect external demand.